BP to Buy US Retail Fuels Giant for $1.3B

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.
KP Photographer

BP has agreed to buy fueling and travel services giant TravelCenters of America (TA) for $1.3 billion in cash, positioning the UK supermajor to advance several of its “strategic transition growth engines.”

BP said Thursday that it will acquire all of the outstanding stock of Nasdaq-listed TA for $86 per share, an 84% premium to TA’s average trading price over the last 30 days.

TA’s assets include around 280 “travel centers” across 44 US states that currently offer diesel and gasoline, truck maintenance and repair, food stores and restaurants, among other services.

They will complement BP’s existing US convenience and mobility business and provide opportunities to expand new offerings, including electric vehicle (EV) charging, biofuels, renewable natural gas (RNG) and, eventually, hydrogen for trucking fleets.

CEO Bernard Looney said BP is “leaning into our transition growth engines” and described its plans for TA sites as “a concept of a potential mobility site of the future.”

“While we expect that traditional fuels demand will remain a material part of the energy mix through the decade, demand for lower-carbon mobility solutions is growing rapidly, in particular from fleet customers,” Looney said on a conference call discussing the acquisition.

He said the TA deal allows BP to scale up its ability to meet this growing demand.

Transition Growth Strategy

The deal bolsters BP’s strategy of investing in the sourcing and sale of low-carbon mobility fuels, evident in last year’s $4.1 billion acquisition of renewable natural gas specialist Archaea Energy.

Just this week, BP pledged to invest $1 billion by 2030 in EV charge points across the US through its BP Pulse brand.

In 2021, BP took full ownership of a convenience store joint venture, part of a larger trend of Western majors reinvesting in retail and commercial outlets after shying away from the sector earlier this century.

BP expects to see a greater than 15% rate of return combined on its convenience and EV charging business going forward.

It expects 10% growth in US truck freight by 2030, with strong continued diesel demand. TA stations currently sell about 150,000 barrels per day of fuel, 90% of which is diesel.

Around 70% of TA’s total gross margin is generated by its convenience services business, almost double that of BP’s, the major said.

Strong Interest

TA said it had begun receiving “unsolicited interest” from suitors and hired advisers to help it run “competitive rounds of bidding from potential buyers” that resulted in the BP deal.

BP will pay a multiple of about six times Ebitda for TA, which compares favorably to other recent deals in the sector.

The lower multiple was partly due to the fact that TA does not own much of its land; most of it is leased. In conjunction with the deal, BP has also negotiated new lease terms with SVC, which owns most of the land housing TA travel centers.

BP now has five 10-year renewal options for land holding 178 of the travel centers beyond their initial 10-year terms, according to SVC.

Decades of Investment

BP said it plans to devote about $200 million per year in capex to the TA assets.

“We look at this as a 50-year-plus investment — we’ll be operating these sites in 2073 and beyond,” Looney said.

BP said it expects TA to be accretive to free cash flow “immediately,” with associated Ebitda growing from $600 million over the last 12 months to around $800 million in 2025.

TA’s network is situated primarily on some of the US’ busiest highways and interstates, with “basically no overlap at all” with BP’s more than 8,000 predominantly off-highway convenience and mobility locations, Looney said.

The deal is expected to close in mid-2023.

Corporate Strategy , M&A, Majors, Retail Marketing, Mobility, Electric Vehicles, Biofuels (incl. SAF), Hydrogen
Wanda Ad #2 (article footer)
Project developers are still looking for guidance on how they can take advantage of the “bonus rates” for clean energy tax credits enacted by the US Inflation Reduction Act.
Mon, Sep 25, 2023
Companies are not indifferent to Indonesia's large resources and recent efforts to improve its business climate, but time is still needed to fully convince changes will stick.
Mon, Sep 25, 2023
The proposed expansion, which is currently being marketed by developer Sempra, would double the capacity of the base project in Texas.
Fri, Sep 22, 2023